Brazil's Senate approves labor overhaul by strong margin

BRASILIA (Reuters) - Brazil’s Senate on Tuesday approved the country’s first major overhaul of labor rules in seven decades in a crucial victory for beleaguered President Michel Temer as he seeks to pull the economy out of its worst ever recession.

The bill, which modernizes some labor laws dating back to the 1940s, was passed in a 50 to 26 vote following approval in the lower house of Congress and will be sent to Temer to be signed into law.

The changes, which were opposed by trade unions, give more leeway to collective bargaining and reduce the scope for legal action in labor disputes in Latin America’s largest economy. Remote work will become regulated and companies will get more flexibility to allocate work hours and vacation time.

Approval of the labor reform in the Senate did not necessarily mean Temer held enough support in the lower house to avoid being suspended from office later this month to be tried for corruption.

However, it showed continued support in his multiparty coalition for an economic agenda that investors see as crucial to reviving Brazil’s economy.

Under the labor bill, labor union dues, currently mandatory, will become voluntary. The bill also gives more flexibility for part-time work and temporary contracts.

“We’ve raised our forecasts for job growth in coming years after we started to expect the labor reform approval,” said Alessandra Ribeiro, an economist with Tendências Consultoria.

Opposition senators talk in the dark after the lights were switched off following the adjournment by Senate President Eunicio Oliveira of a plenary session for a vote on labor reform, in Brasilia, Brazil July 11, 2017. REUTERS/Adriano Machado

“The changes will make the job market more flexible and above all they will lower the risks associated with new hires.”

Unions said the changes reduced job security while weakening their organizing power by eliminating mandatory union dues.

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“None of us senators campaigned in our districts in favor of a labor reform,” Workers Party senator Gleisi Hoffmann said on the Senate floor Tuesday during a failed opposition attempt to obstruct the vote. “None of you here was mandated to vote this reform.”

Some senators within the ruling coalition also opposed some parts of the bill but agreed to pass the proposal exactly as approved by the lower house after Temer vowed to make a few small changes by provisional decree.

Many of Temer’s proposals for the economy, including planned auctions for oil licensing rights and transport concessions, have remained on track despite the political crisis.

The government initiative most likely at risk, according to lawmakers, was a proposed overhaul of the social security system. It requires a supermajority of votes in both chambers of Congress to change the constitution.

Temer was charged last month with taking multimillion-dollar bribes, but the lower house of Congress must now vote on whether to allow the Supreme Court to try the conservative leader.

He has repeatedly denied any wrongdoing and refuses to resign despite polls showing his government’s approval rating is in the single digits.